Are you good at setting boundaries? If you’re not, then rest assured that many individuals struggle with setting and enforcing boundaries.

And what kind of boundaries are we talking about here?

Well, imagine for a moment that a school’s playground is situated so close to a highway that you could reach out and touch the passing cars. In fact, there are no fences surrounding the playground and cars zip right by at 80 miles per hour, unimpeded.

Now, understandably, when it’s time for recess, both the teachers and children face an overwhelming amount of stress and anxiety as they head out to play. For the kids, their concern is getting too close to the edge of the highway, so they play in the center of the yard for fear of the vehicles passing by at high speeds.

And for the teachers, their anxiety comes from the constant worry about a rogue child leaving the playground and wandering onto the highway, which could ultimately lead to a tragic outcome. It then goes without saying that in this situation, recess is not an enjoyable experience for either the children or the teachers. That’s because they spend their free time huddled up in the center of the schoolyard, each vigilant for their own reasons, instead of enjoying the present moment.

Now, let’s say that the city puts up a reinforced concrete wall to separate the highway from the playground. How do you think this outcome would change the recess experience? Certainly, with a solid fence in place, the children can utilize the entire playground, and run right up to the wall, without worrying about all of the high-speed traffic on the other side of the barrier.

At the same time, the teachers would likely be less anxious because they can rest assured that the newly constructed barrier will prevent a wayward child from wandering on to the highway.

Now, if you’re a parent out there, how would you feel knowing that your child was playing near a busy highway with nothing standing between them and the cars? Well, too often, that’s what happens when we set about managing our money without setting prudent financial boundaries.

Like a protective wall separating a school playground, boundaries tell others where they end and you begin. While on the surface setting boundaries seems to look like a form of restriction or control, this practice involves setting limits on how much emotional energy and time we give to others and ourselves and has the benefit of clarifying expectations, demonstrating self-esteem, fostering trust and encouraging mutual respect.

And when it comes to money, financial boundaries are intended to set a wall around how you use your life energy to manage your finances.

To be sure, financial boundaries are essential for maintaining a healthy relationship with not only our money, but also with your friends and family. And by embracing financial boundaries, you can likely experience increased financial stability and harmony in both personal and relationship contexts, and more importantly, make essential financial decisions while protecting your emotional and mental well-being.

Understand How Boundaries Can Help You

So, how can setting financial boundaries improve the money relationships you have with yourself and others?

Clarifying Expectations

Well, let’s look at it from the perspective of clarifying expectations.

By outlining the limits of acceptable behavior and communicating these limits effectively, you help others understand what you expect from them.

For instance, in the book, Boundaries, by Henry Cloud and John Townsend, they describe scenarios where someone like Bob, for example, frequently shows up unannounced at Tom’s home, expecting to be welcomed in at any time, without regard for Tom’s schedule or needs.

By setting a boundary, Tom would communicate to Bob that while he values their friendship and wants to spend time together, Bob needs to call or schedule a visit in advance, so that Tom can prepare and make time for him. This act of setting boundaries helps to clarify expectations and set mutual respect for each other’s time and space.

And without a boundary in place, Bob may continue to show up unannounced, causing stress and resentment in the relationship. That’s why by setting a clear boundary, both parties know what is expected and therefore they can maintain a healthier, more respectful relationship going forward.

Self-Respect

Another benefit of establishing boundaries is that it demonstrates self-respect to ourself and others. That’s because when we communicate our needs and expectations, it signals that we value ourselves and our well-being.

In Nancy Levin’s book, “Setting Boundaries will Set You Free,” the author gives us an example of someone like Michelle, who has a pattern of always saying “yes” to her boss’s requests, even if it means sacrificing her own needs and personal time.

And by setting a boundary and saying “no” to certain requests, Michelle demonstrates that she values her own time and energy, and that her needs are important too. And this act of self-respect can lead to a greater sense of empowerment and self-worth.

What’s more, Levin argues that when we establish healthy boundaries, we show ourselves and others that we are worthy of respect and consideration. And by setting limits on what we are willing to tolerate, we communicate that our needs and feelings matter, and we create a foundation for healthy relationships built on mutual respect and understanding.

Fostering Trust

Now, setting clear boundaries can also fosters trust because when we’re open about our needs and expectations, we show our reliability and trustworthiness.

For example, in her book “Daring Greatly,” Brene Brown shares a story about a woman like Gretchen, who was struggling the relationship she had with her mother-in-law. Now, Gretchen felt like her mother-in-law was constantly criticizing and interfering in her life, and she was having trouble setting boundaries.

With time, Gretchen learned to set clear boundaries with her mother-in-law, telling her that she could not tolerate the constant criticism and interference in her life. As a result, this specific relationship improved and Gretchen felt more respected and valued.

Now, Brene suggests that setting boundaries in this way fosters trust because it establishes clear communication and mutual respect. And when we’re able to communicate our needs and expectations effectively, we show that we are reliable and trustworthy, which builds stronger relationships and fosters a sense of trust in our personal lives as well as our professional ones.

Mutual Respect

Finally, establishing our limits while also honoring other people’s boundaries leads to more rewarding and mutually beneficial relationships through mutual respect.

For example, in the Boundaries book, Cloud and Townsend share a story about a woman like Sarah who was constantly being taken advantage of by her friends. That’s because Sarah was always available to listen to their problems and offer support, but when she needed help, Sarah’s friends were nowhere to be found.

Over time, Sarah learned to set clear boundaries with her friends and communicate her needs and limitations. In fact, Sarah stopped being the “go-to” person for everyone’s problems and started focusing on her own needs and goals.

As a result, Sarah’s relationships with her friends improved, and they learned to respect her boundaries and limitations. What’s more, Sarah was able to establish a more balanced and mutually beneficial relationship with herself and her friends.

Indeed, Townsend and Cloud suggest that when we are able to communicate our needs and limitations effectively, we create a space for others to do the same, which leads to a healthier and more balanced relationship for everyone involved.

To be sure, setting boundaries is crucial for fostering healthy, fulfilling, and respectful relationships. And by clarifying expectations, showing self-respect, building trust and fostering mutual respect, we can create a strong foundation for effective communication and more importantly, financial and emotional well-being.

Set Financial Boundaries with Yourself

Alright, so now that we have a baseline for what healthy boundaries are, let’s look at this approach from the context of how you deal with your own money.

Indeed, while boundaries often tell others where they end and you begin, when it comes to setting financial boundaries, we often need to start with focusing on ourselves.

And what does this mean?

Well, psychologist Anne Katherine in her book “Boundaries: Where You End and I Begin,” explains that setting boundaries with yourself involves recognizing your limits, being aware of your emotional and physical needs, and asserting those needs to maintain a healthy balance in your life.

That’s because setting boundaries with yourself can help you avoid burnout, manage stress, and cultivate a sense of self-worth. And without this healthy baseline in place, you can’t expect others to support or respect the boundaries you plan to set with them.

Indeed, when it comes to financial boundaries, Anne Katherine’s insights can be applied in a similar fashion. Based on her book, Anne likely would emphasize the importance of understanding your financial needs and limits, setting clear guidelines for spending, saving, and investing, and practicing self-discipline to adhere to those guidelines.

Boundaries and Giving Your Money Purpose

So, then, how do you go about doing the work of setting financial boundaries with yourself?

Well, to start, setting financial boundaries with yourself involves identifying a purpose for your money, and then aligning your own spending, saving, and investing habits with your broader values and purpose. This approach can help you establish a sense of control over your finances and financial future and ultimately help reduce your financial anxiety.

Indeed, creating a financial plan that includes a solid cash management process, allocating a certain percentage of your income towards savings and investments, and avoiding unnecessary expenses are all forms of setting clear boundaries about your money.

For example, consider Samantha’s story. Now, Samantha is a 38-year-old software engineer, who recently received a significant salary increase after her promotion. Now, despite her newfound financial success, she found herself feeling out of control and anxious about her financial future, as she struggled to maintain healthy financial boundaries.

Without a purpose for her money, Samantha was unsure how to allocate her income wisely. She had no idea how much of her salary should be set aside for savings and investments, and her spending habits had become increasingly impulsive. Now, this lack of control over her personal finances also affected her financial boundaries with others. That’s because she often found herself lending money to friends and family without considering the impact on her own financial stability.

And Samantha’s anxiety intensified when she realized that her lack of a solid cash management process left her with minimal emergency funds, making her vulnerable to unexpected expenses. What’s more, her inability to track her spending meant she was often surprised by her credit card bills at the end of each month.

So what did Samantha do? Well, to regain control, Samantha put in the work to identify her personal values and what she ultimately wanted to get out of her life, and created a financial plan that would finally give her money purpose.

And by doing this work, Samantha was able to establish a monthly budget that included allocating a certain percentage of her income towards savings and investments, as well as setting limits on discretionary spending. What’s more, Samantha started using her cash management process to track her expenses, which helped her avoid unnecessary costs and gain more financial confidence.

Boundaries to Reduce Emotional Spending

Another way to set financial boundaries with yourself is to become more aware of your propensity to spend impulsively or emotionally. And doing so can help prevent purchases outside of your budget or not aligned with your values or the purpose that you’ve defined for your money.

Remember, a boundary is a decision about how and where you give your emotional energy. And from this perspective, Bari Tessler, the author of “The Art of Money,” emphasizes the importance of establishing emotional boundaries as a tool for overcoming impulsive spending.

Indeed, Tessler believes that impulsive spending is often a response to emotional triggers such as stress, anxiety, or a desire for instant gratification. And by setting financial boundaries, you can learn to identify and manage your emotions in healthier ways, which can reduce the urge to engage in impulsive spending.

So, how do you establish boundaries in this arena? Well, Tessler suggests several ways to establish emotional boundaries to overcome impulsive spending, and the first of which is to develop awareness of your emotional triggers.

From this perspective, if you have trouble with setting boundaries on emotionally driven or impulsive spending, Tessler recommends keeping a journal to track your emotional responses and subsequent spending habits. Doing so can help you identify patterns and triggers that lead to impulsive spending, and potential ways to address them.

Then, once you have identified your emotional triggers, Tessler suggests setting limits on your emotional responses. For example, if you find that stress triggers impulsive spending, you can set a boundary to take a break or engage in a stress-reducing activity before you pull the trigger on that next regretful purchase.

Tessler also emphasizes the importance of practicing self-compassion when establishing financial boundaries to curtail emotional spending. This means being kind and understanding with yourself, even when you make mistakes or struggle to avoid impulsive spending. Indeed, self-compassion can help you stay motivated and avoid feeling discouraged or overwhelmed.

Boundaries to Foster Healthy Financial Habits

Lastly, setting clear financial boundaries can help you develop sustainable money habits. Remember, the act of setting boundaries with yourself is about deciding where you will (and won’t) devote your time and energy.

Indeed, Mark Manson the author of, “The Subtle Art of Not Giving a F*ck,” argues that people often have a limited amount of time, energy, and attention to devote to different areas of their life. And, so, when it comes to your money, three areas where you give your energy are founded in your values, responsibilities, and control.

So, then, from this perspective, the first thing you’ll want to focus on to develop sustainable financial habits is to set boundaries on your values and priorities.

What does this mean?

Well, let’s say that one of your core values is to be financially independent. When your choices are driven by this value, you’ll likely prioritize saving money each month and avoid overspending on non-essential items, such as eating out or buying expensive clothes. And, by aligning your spending habits with your values, you can create a sense of purpose and motivation for sticking to your financial habits.

And, so, how do you go about doing this?

Well, take some time to reflect on your beliefs, attitudes, and behaviors around money and evaluate whose money script you’re living.

Remember, a money script is a set of thoughts, beliefs and attitudes you have about money that, more often than not, are influenced by the people around you. If you’re not sure whose script you’re living, then be sure to check out our recent posts on Money Scripts so that you can get some much needed guidance in this area.

Next, set boundaries to be more responsible. Now, responsibility refers to your obligation to take care of yourself and your finances. And so, setting financial boundaries involves taking responsibility for your financial rituals. For example, let’s say that you have a habit of ignoring your bills and not keeping track of when they are due because you’re dealing with financial procrastination.

Naturally, this can lead to missed payments, late fees, and damage to your credit score. Therefore, taking self-responsibility in this situation, would involve identifying emotional triggers that are leading to your willingness to procrastinate.

At the same time, it may also involve taking the time to review your bills each month and checking your bank statements for errors or discrepancies to ensure that you’re not leaving money on the table. Either way, setting responsibility boundaries can help you stay focused on what needs to be done, and help develop sustainable habits.

Finally, set boundaries around what you do and don’t have control over. Remember, you can’t control where the markets are headed, but you can control your investment strategy. You can’t always control when you or a loved one will pass away, but you can control how you’ll prepare financially for just such an event. You can’t control whether you’ll lose your job, but you can be prepared if it happens.

Indeed, Franklin Covey, in his book, “Seven Habits of Highly Effective People,” suggests that if you want to use your life energy wisely, you’ll need to have a clear understanding of what you can and can’t control. Covey refers to this as the circle of influence.

And what does this mean?

Well, according to Franklin Covey, there are three areas of the circle of influence:

  1. Circle of Concern: This includes all the things that an individual is concerned about, but has little or no control over, such as the weather, political events, or other people’s behavior.
  2. Circle of Influence: This includes all the things that an individual can impact including their own behavior, thoughts, and emotions, as well as their relationships and work.
  3. Circle of Control: This includes all the things that an individual has complete control over, such as their own actions, choices, and attitudes.

Now, when it comes to choosing where to give your energy, Covey emphasizes the importance of focusing on the circle of influence and circle of control, rather than expending energy on things in the circle of concern that cannot be changed. That’s because by focusing on what can be controlled, you can create sustainable habits and make progress towards your financial independence goals.

The big takeaway here is that personal financial boundaries are about deciding who and what gets your emotional energy when it comes to your money. And by creating boundaries around your money’s purpose, emotional spending, and habits, you can create mental and emotional space to concentrate on pursuing your long-term life and financial goals.

Setting Financial Boundaries with Others

And now, the final point that we’ll discuss when it comes to financial boundaries is those we set with other people. Now it’s crucial to set boundaries around money when dealing with other people, and here’s why.

First and foremost, if you don’t set boundaries, you might end up giving away, lending or spending more money than you can afford, which could put you in a tough spot. Now, imagine if money issues started causing problems in your relationships with friends or family. That wouldn’t be great, would it? Well, setting boundaries helps avoid misunderstandings and keeps things from getting awkward or causing conflicts.

You might wonder, how can setting financial boundaries help others? Well, by setting effective financial boundaries with others, you encourage them to be responsible with their own money. This way, they learn how to manage their finances and become more independent, rather than relying on you when they fall short in their own financial habits.

Indeed, when you set appropriate financial boundaries, you can help reduce your own stress and guilt because you won’t constantly feel like you have to help others financially.

Let me explain what I mean here by telling you a story about, Lisa.

Now, Lisa is a successful marketing executive who’s really smart about her money. But there was a time, however, when she found herself in a bit of a financial predicament, all because of social pressures.

You see, Lisa’s friends loved going out for fancy dinners, taking expensive vacations, and basically, just living the high life. And Lisa, not wanting to feel left out or seem stingy, would simply go with the flow, even though she knew it wasn’t the best choice for her finances.

What was the result?

She was constantly stressed about money and struggling to save for her future.

Then, one day, Lisa decided she’d had enough. She knew she needed to set some financial boundaries and be more open about her money matters with her friends and family.

So, what did she do?

Well, the next time her friends invited her on a luxury weekend getaway, Lisa took a deep breath and said, “Guys, I appreciate the invite, but I’ve got to be honest with you—I’m trying to be more responsible with my money, and this trip is out of my budget right now.”

Now, to her surprise, a few of her friends admitted they were feeling the same way! They’d been silently struggling with keeping up with their own social pressures, but were too embarrassed to say anything.

In fact, Lisa’s honesty sparked a conversation about finances among her friends, and they started brainstorming ways to have fun without blowing their budgets.

Now, Lisa and her friends have a new tradition: once a month, they get together for a potluck dinner at someone’s house instead of going out to an expensive restaurant. They still have a great time, and the best part? Everyone’s a lot less stressed about money.

So, what’s the big takeaway? Don’t be afraid to assert your financial boundaries and talk openly about money with your friends and family. That’s because you might just find that others are in the same boat, and you’ll all be better off for it.

By this point you might be thinking to yourself, “the approach sounds simple, but how do you actually make this happen?”

How to Set Boundaries with Friends and Family

Well, in the book “Set Boundaries, Find Peace,” author Nedra Tawwab discusses the importance of setting financial boundaries with friends and family. She emphasizes that money can be a sensitive and emotionally charged topic, so setting boundaries around finances is crucial for maintaining healthy relationships.

But how do you set these boundaries with friends and family?

First things first, know your own financial goals and limits. This understanding comes from the work you did in setting your own personal financial boundaries and can help you more clearly articulate your own financial expectations and goals before engaging in conversations with friends and family about money. Then, use what you’ve learned about your own financial boundaries to communicate to others what you’re willing and unwilling to do when it comes to your money.

For example, let’s say that you’re considering co-signing on a loan with a friend or family member.  In this case, take the time to review your own financial goals and the purpose that you’ve defined for your money. This will help you determine whether co-signing is a good fit for your own financial situation and whether you can afford the risk.

Next, be clear and consistent in your communication. More specifically, when discussing money with loved ones, it’s important to be clear about your boundaries and consistent in enforcing them so that you can avoid blame or miscommunications.

For example, if you’ve established a boundary with a family member, and they’re still hassling you to lend them money, then you might need to remind them of the boundary, and learn to use “I” statements to express your own needs and concerns.

And what if you have to say “no”? Well, truth be told, setting financial boundaries often involves saying “no” to requests for money or financial assistance. But remember that saying “no” is not a rejection of your loved ones, but rather a way to prioritize your own financial well-being.

For example, if a friend asks to borrow money and you’re not comfortable with the request, say “no” in a firm but respectful manner. Here, you can explain that you’re not in a position to provide financial support, but you’re happy to help in other ways if possible.

Also, if you’re unwilling to say “no” outright, try thinking through some alternatives, such as helping your loved ones find other sources of financial support or offering to provide non-financial assistance.

For example, if a family member asks for a loan that you’re not comfortable providing, you can offer to help them find other sources of financial support, like connecting them with local financial resources or recommending job opportunities. Alternatively, you can provide non-financial assistance, like helping them move or offering emotional support.

Finally, take care of your emotional well-being. Setting financial boundaries can be emotionally challenging, so prioritize your own well-being throughout this process is essential. And what does this look like? Well, taking care of your emotional well-being might involve seeking support from a professional, practicing self-care, and being patient with yourself as you navigate this process.

For example, if setting financial boundaries with loved ones is causing you emotional stress, seek support from a therapist or trusted friend. You can also practice self-care activities, like meditation or exercise, to help manage stress and maintain a sense of well-being. Overall, be patient with yourself as you navigate this process and prioritize your own emotional needs.

Remember, social pressures can heavily influence your own financial decisions, making it crucial to assert financial boundaries with friends and family. And by establishing clear guidelines and openly discussing money matters, you can navigate social expectations and emotional pressures while maintaining your financial well-being.

Set Financial Boundaries and Gain Peace of Mind

When it comes down to it, financial boundaries play a pivotal role in achieving your long-term life and financial goals by enabling you to stay emotionally disciplined when you’re tempted to do otherwise.

Indeed, by taking the time to assess and tweak your boundaries, you’re giving yourself the opportunity to respond to life’s inevitable ups and downs with flexibility and resilience.

But what’s the ultimate outcome of embracing financial boundaries? The answer is simple: increased harmony, stability, and overall well-being in both your personal life and your relationships. Indeed, when you actively engage with your finances in a thoughtful, proactive manner, you’re not only setting yourself up for success but also fostering healthier, more fulfilling connections with those around you. But most importantly, doing the work of setting healthy financial boundaries ultimately takes you one step closer to becoming the master of your own financial independence journey.